It seems that there are more and more scams and dishonest deals in the news every day... and it may appear that no one is safe. Many people put off making investments that could make a lot of money down the road because of the fear of stock market scams, but with a little bit of care and common sense they don't have to.
It's possible to easily avoid most stock market scams, if you take the time to do a little bit of research before making your investments and avoid the lure of "fast money."
Here are some basic tips that can help you to avoid stock market scams and keep your money safe and secure while enabling you to make the investments that you want to make.
Know the Source of Your Information
A common source of stock market scams comes from spam e-mail, often in the guise of unreleased information or secret stock tips. Even if the claims in the e-mails or communications were legitimate, it can be very dangerous to act on any "unreleased" or "secret" information. Insider trading, or trading made by those who know about financial news within a company before the public knows, is illegal, and using insider information as the basis for your stock trades can get you fined and possibly even earn you some jail time.
Even though most anonymous e-mail tips don't count as insider information, it can still be dangerous to act upon any information that you receive in this manner. If you want sound stock advice, hire a market analyst or read the financial sections of major newspapers or websites.
Research the Stocks You Want
If you find a stock that seems interesting but you aren't sure if it's legitimate, take the time to do a little bit of research on both the company that issued the stock and the performance of the stock in the market. Most financial websites offer free stock tracking and performance histories, so take advantage of the information available to you and know what you might be getting yourself into. If you aren't able to find much information on a stock that seems like a great deal, remember the old adage that if something seems too good to be true then it probably is. When dealing with stocks that may not be legitimate, it's usually better to err on the side of caution.
Find a Broker You Can Trust
Many people are afraid to invest in the stock market because they're afraid that they'll be scammed by a fraudulent stock broker. In order to avoid this, take a little bit of time to find a broker that you know that you can trust. Ask the advice of people who you know and trust, or failing that take some time and research brokerage firms in your area.
Another alternative is taking the time to look at online brokerages, finding those that have been reviewed positively by trusted financial and news websites.
Keep an Eye on Your Investments
One of the best ways to make sure that you don't fall victim to a stock scam is to make sure that you keep a tight watch over your investments. Periodically check the progress of your investments, making notes and inquiries about anything that doesn't seem right about your chosen stocks and bonds.
This will also help you to identify when it's time to buy more shares or sell the ones that you have, and can assist you in learning which stocks and bonds are worth the trouble and which aren't.
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